LoanHounds - Find loans for new home mortgage, refinance, debt consolidation, home equity, bad credit, equity line of credit, home refinancing  
You are in: Home > LoanHounds Mortgage & Loan Blog

LoanHounds Mortgage & Loan Blog

Friday, October 21, 2005

Mortgage Credit News - October 21, 2005

It’s not enough to move low-fee mortgage rates below 6.00%, but the 10-year T-note flinched at 4.50% all week long, and this morning has retraced to 4.38%.
No data showing economic weakness caused the rate decline: the newest information says the national economy came through Katrina/Rita unimpaired.
Two things have helped long-term rates to find a top: the painful understanding that if the Fed is not yet tight enough to hurt, it soon will be; and second, unstable weakness in the stock market.

In the perverse world of bonds, inflation-scare stories help. It goes this way: if inflation is really worse than we think -- under-measured, misunderstood -- then the Fed will have to play catch-up, tightening longer-higher-faster. If the Fed is behind, then catch-up raises the chance of a recession to probable, and in a recession those who own bonds make a ton of money.
For the time being, I wouldn’t pay much attention to the hobgoblin in ketchup on the front porch. People who should know better quarrel all the time with inflation-measurement methodology; this time the quibble is with the housing fraction of the core rate, measured near zero in a time of double-digit home-price increases. Housing inflation is measured by rental equivalence, and as rents everywhere are flat, housing cost is not inflating. This approach is correct, as changes in the capital cost of homes have little to do with consumption prices and the value of currency.
Authentic concern for inflation is flashing amber, not red. We are in an energy-cost-pushed moment, and energy costs are likely to reverse in well-established cyclical pattern. So long as the energy-cost pressure does not move into consumer prices in general, or into wages, then the Fed is on track.
That track, probably 4.50% by the February 1st meeting, is by itself enough to raise recession chances. Fed Gov Donald Kohn (long-time Fed staffer, Friend Of Alan’s, and one very tough cookie who might just get the job): “We are not yet at a point where we can stop and watch the economy evolve for a while.”

Historically, as the Fed proceeds upward in these cycles, there has been a race to handicap. Who breaks first? Housing? Stocks? Consumers, or inventory-holding merchants and manufacturers? Way back, ‘50s and ‘60s, it was the inventory holders, dumping to escape high financing costs. Today, just-in-time management means that inventories hardly settle on pallets, and there’s not much to liquidate.
In the 70s and 80s, high rates chewed up housing first. Then, at the end of the ’99-’00 rate-hike, the stock market was the first to collapse (I admit my considerable personal relief).
Stocks are fading now despite pretty good earnings, a still-strong economy, and actually paying dividends (only 2% across the S&P 500, but better than the sub-1% prior to 2000). The Fed is part of the reason: the cost of buying on margin has more than doubled in a year; the rate of discount of future earnings has tripled, and the Fed is going to slow the economy sooner or later. Stocks are also heavy at the sight of GM and Ford slowly going out of business, and by the newest episode of Wall Street piracy. (They go on and on, I know, but half a billion dollars in fraud bankrupting Refco ninety days after it went public... really quite an achievement. Our national moral leadership is, of course, silent on the matter.)
Aggregate housing stats are still strong, but good testimony has some hot markets flipping from seller to buyer, and more poised to do so. Except for long interest-only loans, the whole universe of adjustable-rate mortgages is now useless; construction money has doubled; and a trillion-worth of home equity lines has gone from 4.00% 2002-2004 to 7.00%, and going higher. We’ll see the impact soon

© Boulder West Financial Services, Inc.

6 Comments:

  • If you are in need of money for any purposes like bad credit car loans we can help. We are one of the fastest growing finance sites and specialize in bad credit car loans and many other types of loans. To apply online, come to http://www.nwcleasing.com and let us show you just how fast and easy it is to get the financing you need today.

    By Blogger Natwho, at 11:28 PM  

  • If you are in need of money for any purposes like debt consolidation we can help. We are one of the fastest growing finance sites and specialize in debt consolidation and many other types of loans. To apply online, come to http://www.nwcleasing.com and let us show you just how fast and easy it is to get the financing you need today.

    By Blogger Natwho, at 12:14 PM  

  • Life is great out here in Mauritius. Plesant weather, good breeze and what more I got a great card offer from credit cards

    By Blogger Samuelwilliam, at 2:57 AM  

  • If you are in need of money for any purposes like mortgage we can help. We are one of the fastest growing finance sites and specialize in mortgage and many other types of loans. To apply online, come to http://www.nwcleasing.com and let us show you just how fast and easy it is to get the financing you need today.

    By Blogger Natwho, at 3:49 PM  

  • Thanks for the advice. Following your advice, I found that this website is good source to apply online for credit cards.

    By Blogger Lachlanjack, at 1:32 PM  

  • http://www.nwcleasing.com specializes in guaranteed credit cards and many other types of credit programs. Let us help you get the financing you need fast, at the lowest rates availabe in the country. Apply online at http://www.nwcleasing.com and get an instant decision and your money in as little as 24 hours.

    By Blogger Natwho, at 6:19 PM  

Post a Comment

<< Home


 

   

Home | Site Map | Company Info | Contact Us | Press Room | Terms of Service

Copyright ©2002-2005 American Money Network, LLC